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Accounting for a "Freemium" world

So, we reached a key milestone in the Coplin household over the summer, my son has taken his first steps down his own path towards financial independence. Yes, much to the pain of my reluctant wallet, it is finally pocket money time.

I’ll spare you all the details of the endless wrangling around how much (£2) and what we felt he needs to do in order to earn it (make his own “contribution” to the family). The point is, we decided it was time he started to learn the consequences of being responsible for his own spending.

The thing is though, teaching financial independence in a freemium, digital world is an incredibly different proposition to anything we have previously experienced (either as kids or even as parents even just a few years ago). In a world of tangible physical products which have a price point as a point of entry, it’s easy to teach the lessons of “save for what you want and you’ll enjoy it all the more” but in the friction free freemium world, this lesson is presented with a few problems.

kidsshutterstock_115520779Like any other 8 year old, my son loves apps, and there are a few really good freemium games that he really enjoys. You know the sort, these are often brilliant and compelling games that are free to download and let you acquire points within the game to buy attributes, power ups or just plain old items to bestow on your avatars or whatever. Typically a good freemium game will let you earn these points whilst also providing you with a short cut that means you can just buy the points and it’s the proximity of this choice combined with the threshold of how much effort you need to put in to earning in order get the additional content you need that seems to be causing some cracks to start to appear in the whole freemium approach. Some freemium games providers seem to push it a bit too far, bringing the in-game upgrades consistently (and increasingly intrusively) closer while pushing the “free” part further and further out of reach.

Of course the key lesson I’m trying to impart to my son is that you have finite resources in your piggy bank and you want to buy a bunch of different items, and it’s up to you to prioritise finite resources accordingly. This is tough for any kid (bloody hell it’s still tough for me) but the freemium model lowers the friction of any purchase – in that it’s really easy to buy what I want, I don’t have to go anywhere, I don’t have to exert any effort, I just click on a button and hey presto! Instant gratification. It’s like locking the kid in a sweet shop, taking the lids of all the jars and just saying “Help yourself! Go nuts!, just remember you’ve only got a finite amount of money” I don’t know many kids that would come out of that situation with any cash left (or even without over spending), regardless of how much they wanted anything else outside the sweetshop.

It’s the combination of the proximity of the purchase and the lack of friction of the purchase that causes the problem. Kids are pretty instantaneous, occasionally impetuous and have yet to learn the long, hard boring lessons about patience and value. (And I admit that as an adult there are times when I am really jealous of that).

There’s another related issue here about the value of “effort” – I had this conversation with my son which was basically, “look Dad, why would I spend all my free time earning 1,000 points when I can just buy them for 70p? After all, I’m getting pocket money now”. 70p? I can’t even buy a bag of crisps for that, it’s a trivial amount of money but it’s the principle that is infinitely more important. Ultimately it’s an argument that I have a tough time responding to without resorting to that worst excuse of parenting “just because”.

Ultimately I can cope with the latter argument, as a parent I’m used to the fact that I have to work hard to get my messages across, and that all I’m doing is to try not recreate the same “mistakes” my parents my made, (while acknowledging in the process that I’ll be making plenty of new ones that my son will rail against with his kids) but it’s the (lack of) transparency of the freemium model that worries me most and it is something that app providers (and platform providers) really need to give some thought to.

Of course, this year, there’s been plenty of news coverage of kids racking up thousands of pounds of bills on their parent’s credit card without anyone really being aware it was happening. Our own research showed that on average kids spend around £31m a month on apps or in app purchases without asking for permission! Thankfully people and organisations are evolving in how they both deal with that situation (give you the money back) and building systems and education that help parents manage and control spending, but I think there’s another level of detail that we’ve not yet reached and it’s one of individual app accountability and transparency of reporting that will help address the issues I’ve outlined here.

Don’t mistake any of this for either a rant against the freemium model or worse, some miserable old git hankering after simpler times. I actually love the freemium model, I think it’s a really important development in the software industry, but I just think we need to help our society evolve to understand how to make best use of it.

Frankly, I really don’t care if my son wants to blow his “lavish” allowance on virtual cabbages that he can feed to his virtual pets, or on that gold laser powered jump suit that will look “A-W-E-some!” but I do want him to be able to make decisions easily. He should be able to look at his individual apps and see how much he has spent on each of them, not for me to have to trawl through credit card statements and app store emails to piece together the picture. It’s the same kind of transparency and “business intelligence” we try to create for our enterprise customers to help them make “informed, business decisions” so why the hell wouldn’t we want to do this for our consumers as well?

I get that app developers don’t make much on a free or even a 69p game, but the freemium model will break if it forces the developers to drive monetisation harder by pushing the consumer further and further towards having to spend money in order to enjoy the game and then doesn’t give them the capability to account for their spending. Ultimately, if that plays out, consumers (or their parents) will vote with their feet and just walk away and at that point, just what is the point of the freemium approach other than to obscure and, to an extent, trick the consumer around their spending?

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